Weak rupee may not make edible oil costlier this season

KOLKATA: Indian edible oil prices are unlikely to see significant northward movement this festive season despite a weak rupee as international prices of oilseeds and oils remain muted. India imports nearly 70per cent of its annual consumption of edible oil.

Edible oil future prices — crude palm oil (CPO) and refined soya oil fell for the third consecutive month in August 2018, mainly on higher edible oil stocks and lower international prices of CPO and soya oil. Higher imports of edible oil under the South Asian Free Trade Area (Safta) agreement from countries such as Bangladesh and Sri Lanka at zero duty have also put pressure on prices.

Palm oil constitutes 40per cent of India’s edible oil consumption, followed distantly by soya bean and sunflower oil. The country imports palm oil from Indonesia and Malaysia and soyabean oil from Brazil and Argentina. Ukraine is the major source for sunflower oil.

“At present, we are selling the oils that we had imported when rupee was at 68 levels. The rupee has now touched 71 and there are indications it might weaken further against the dollar. Since the commodity prices are on the lower side there may not be a huge impact on edible oil prices at the retail end. If at all, there is a price hike, it will be a nominal one,” said Angshu Mallick, chief operating officer, Adani Wilmar, a major importer.

The refined soya oil contract on National Commodities and Derivative Exchangehas fallen 7.8per cent since May while CPO on Multi-Commodity Exchange tumbled close to 15per cent since March. At present, refined soya oil is trading at Rupee735 per 10 kg while CPO is trading at Rupee594 per 10 kg.

India imports about 15 million tonnes of edible oil annually, but this year it may be around 14.5 million tonnes. “There are three reasons for this drop — hike in import duty on edible oils, better oilseed production in the country and a weak rupee that may put pressure on importers,” said BV Mehta, executive director, the Solvent Extractors’ Association of India (SEA).

In the past three months, edible oil is falling in the domestic market mainly on continuous decrease in tariff prices on edible oil prices and higher stock positions. The tariff value (base import price) crude soya oil has been the lowest in three years, while CPO is at its lowest in two and half years. Tariff value is revised every fortnight by government and is determined taking into account the prices in international markets as well as changes in the foreign exchange rate.

“Going forward, the edible oil prices may gradually increase due to weaker rupees and improvement in physical demand due to coming festival season. However, higher stocks at ports and pipeline compared to last year and good production prospects may keep the prices under control. International prices are expected to trade lower in coming week due to expectations of bumper soybean crop in the US. Moreover, seasonal increase in production prospects for CPO in Indonesia and Malaysia may keep pressure on prices,” said Ritesh Sahoo, a senior analyst with Angel Broking.